Earlier this month the Wall Street Journal reported that there exists a
loophole in in federal banking rule, allowing nefarious creditors to
garnish retirees' Social Security and Veterans'benefits.
On Friday, June 6. The Alliance for Retired Americans issued this
statement: While federal law is designed to protect these benefits
from most creditors, several bill collectors have legally
manipulated banks into temporarily freezing their customers' accounts
while the issue is sorted out. This ploy by creditors has intensified
since the substantial increase in direct deposit, which is used by 80%
of Social Security recipients.
Lawmakers from both parties are calling upon the Obama Administration
to issue new, tighter regulations to prevent some banks from seizing
funds that were placed in an account via direct deposit.
Sen. Herb Kohl (D-WI), Chairman of the Senate Special Committee on
Aging, and other lawmakers have introduced a bill that would stop further
promotion of the direct deposit programs for Social Security and veterans'
benefits until the Treasury Department issues rules to protect the
benefits from creditors.
"The Alliance recognizes the vulnerability of direct deposit for retirees,
and it is imperative that we press the Department of Treasury to close
this existing loophole," said Barbara J. Easterling, President of
the Alliance for Retired Americans,in support of Sen. Kohl's bill.
Steps to protect your Social Security, disability, veteran's or pension benefits:
- Don't commingle Social Security and exempt benefits with nonexempt funds.
- Don't get a loan or credit card from the bank where your Social Security or pension is deposited.
- If sued, go to court and demand proof of the debt.
- If your bank account is frozen, file an exemption claim within 10 days.